[Startup Bharat] How CareStack has been able to give its early investors close to 13X return in six years
Exits are an important milestone for any startup, and the ecosystem at large. It displays growth and reestablishes investor faith and confidence in the ecosystem. Thus, for CareStack, the Thiruvanathapuram-based dental care startup giving exit to 12 of its early-stage investors that had invested in the company back in 2015 and 2016, this is a big milestone.
In April, the startup raised $22.5 million in funding. The round saw participation from SteadView Capital, Delta Dental of California, Accel Partners, Eight Roads and F-Prime Capital, thus giving a successful buyout to early-stage investors at 4x to 13x the invested capital.
“Towards the strategic side, we have some of the largest dental companies in the United States like Delta Dental- the largest dental insurance company; and Darby Dental- the third-largest dental distribution company. On the private side, we have some successful people like Girish Mathrubhootam from FreshWorks, Babu Vinod from JIFFY.ai, etc,” says Abhilash Krishnan, co-founder and CEO, CareStack.
The startup enables dental offices to move away from the complexities of using multiple fragmented solutions, and manage everything through one complete modern dental software.
Abhilash explains that the cost of building something like this is very high because CareStack is built to replace four or five different companies. With a large team of engineers, it could take a minimum of four years and at least $50 million in capital to recreate CareStack, he adds.
Why invest in CareStack?
Speaking of his exit from the startup, an early investor - Raveendranath Kamath, of NEXT Education, says the founding team is the most important factor that determines the success of a startup. And CareStack was no different.
“What attracted me was the company’s founder Abhilash, and the space of dental healthcare and wellness. Also, that it was a B2B SaaS company with an R&D centre in India targeting markets in the US. CareStack was my second angel investment,” says Raveendranath.
Anas Rahman Junaid, Founder of Hurun India and Sherry Oommen, Founder, Nash Capital Partners, introduced Raveendranath to Abhilash.
"Abhilash’s energy and determination - combined with an uncommon bluntness in conversations is what appealed to me. He would never beat around the bush. By the time the investment was closed, I had doubled the investment amount and participated in the next round of fundraise as well,” recalls Raveendranath.
Positive revenue growth
The team has also been able to show positive revenue growth. Abhilash says that CareStack has a lot of takers because they get paid faster by insurance companies. The intuitiveness in user experience, workflow automation, data consolidation and analytics is instrumental in helping offices maximise insurance reimbursements and patient payments.
As for the revenue model - it is twofold- one is SaaS, where they charge customers a fixed fee per month. The team makes $650 a month per office. Abhilash adds that they also have a revenue cycle management where they manage the insurance billing on behalf of our customers, which basically gets them 6 percent of the insurance revenue that they collect.
Abhilash says in the US, the dental market sees $140 billion worth of dental services a year. The business model is built to tap into 7 percent of those services as their revenue streams.
Back in 2015, when Abhilash founded CareStack, he noticed that dental practices had unsuccessfully used multiple software solutions bolted on top of traditional dental software to manage daily operations. He had started out as a UX consultant, and one of his assignments was for a dental group that wanted to modernise the technology infrastructure and build new patient acquisition systems.
While working with the group, Abhilash managed to see how the dental office works with multiple and different systems bolted on top of traditional client-server practice management systems. The systems are loosely integrated, and staff spend a lot of time troubleshooting issues and doing redundant data entry.
“As these multiple software solutions do not communicate to each other, dental practitioners would need to manually enter the data from one system to another, which can lead to problems like delayed responses, missing out appointments, patient frustrations, delay in receiving patient and insurance payments etc.,” says Abhilash.
Solving a need
Thus, along with Dr Mark D Huzyak, a dentist with close to two decades of experience, he started CareStack with operations in - Florida, Thiruvanathapuram, and Kochi. Today CareStack is a team of 460 CareStackers operating both in the US and India. Abhilash says,
“CareStack enables offices to move away from the complexities of using multiple fragmented solutions, and manage everything through one complete modern dental software. Be it a single clinic or a dental group with two hundred clinics, they will be able to manage their operations- like scheduling, clinical services, patient services, insurance management, business analytics and reporting and integration to telephone through CareStack’s single software solution.”
CareStack serves more than 1000 dental offices now, and according to Abhilash, the company adds more than 50 new offices every month. He says the company is well on its way to crossing $10 million in 2021.
Speaking of their early investment in CareStack, Vinod Jose of Konglo Ventures says that while the dental market is quite fragmented, the sector has strong underlying demand drivers. He adds,
“We had our share of beginner’s luck to invest in someone like Abhilash from the get-go. He is a natural leader, able to build a team around him and had clarity on what he wanted to do. More importantly, he could clearly communicate the direction in which he wanted to go, and displayed the grit and resilience that founders need through his past experiences. CareStack will always be special for us, as it plays a foundational role in our journey - it is where Konglo Ventures began.”
Explaining the market, Abhilash says dentistry is a complex industry where you need to understand the user and how a dental practice workflow is set up.
When a patient walks into a clinic, there are numerous procedures involved in check-in, insurance verifications, payment collection, treatment management etc.
“All these are workflows or SOPs that takes years for people to understand. So here we are - a company based out of Thiruvananthapuram in India, which has never seen a US dental practice before, trying to understand all these workflows in a very short span of time, and build a best-in-class solution, which fulfils these workflows while allowing offices to operate at their highest potential,” adds Abhilash.
Abilash admits gaining subject matter expertise was most challenging. The team overcame this by creating a cross-functional team of engineers, dental practitioners, subject matter experts, and dental educators to collaborate and create solutions that transform the way dental teams work and manage offices.
“It took us three years to gain a solid understanding of the industry, end-users, their preferences, how competition has built systems and translate this understanding to hundreds of people here in India and use this knowledge to build a modern software that CareStack was meant to be,” says Abhilash.
Besides Mark, others in the core team of CareStack have worked in various large enterprises like Oracle, Flextronics and Microsoft for over 10 years before coming together to form CareStack in the summer of 2015.
The market and future
According to reports, 85 to 90 percent adults, and about 80 percent children have cavities. The National Oral Health Programme reveals that Indians often do not consider dental health as serious as physical health, thereby neglecting oral care. The programme’s report also highlights another huge problem: a dearth of dental healthcare workers in India.
Some startups solving the dental healthcare problem are - Toothsi, Denta Mitra, DentalDost, and MobiDent, amongst others.
“The one thing that sets us apart from our competitors is our intuitive user experience and workflows for revenue cycle management, which allows our customers to collect money from insurance companies very quickly,” says Abhilash.
He adds that, with the COVID-19 pandemic, people are increasingly looking for contactless solutions for booking appointments, check-ins, and payments.
CareStack provides solutions to all these contactless workflows, elevating the patient experience.
“This year, we are launching three additional software services - success coaching, digital marketing and patient financing,” says Abhilash.
CareStack is a complete dental practice management software for private practices, and dental startups, to manage all the clinical and business management needs.
“We serve solo practitioners as well as PE-backed large dental groups. Our largest customer is Midwest Dental, a dental enterprise with 240 offices. CareStack is not just a SaaS company, but a SaaS enabled healthcare delivery play, where you start with software and upsell software-enabled service offerings. Our customer lifetime value is 15 years. We don’t experience a churn like in other horizontal SaaS offerings. We look to expand our distribution and serve over 10,000 dental offices and 30 million patients over the next five years," concludes Abhilash.